This appendix describes the information provided for each of the 431 exemptions, deductions, differential tax rates,
deferrals and credits that are presented in this report. It explains some of the principal
assumptions and what the data represent.

Description

The first item for each exemption is a short explanation of the exemption in nonlegal terms. It draws upon the statute,
administrative rules, and discussions with personnel of the agency which collects the tax.

Purpose

This presents the intent of the Legislature in enacting the exemption statute. In most instances, the law does not
explicitly state the legislative intent, so this statement is often at best an
"educated guess" on the part of the analyst.

Category/Year Enacted

For the larger tax sources with many exemptions, the exemptions are grouped together. For example, property tax exemption
categories are public property, nonprofit organizations, private property and personal
property. In an attempt to compile more meaningful aggregated information for all taxes,
the report contains a categorical assignment for each of the exemptions. There are 13
categories of tax exemption based on the type of exemption or its principal beneficiary.
These categories and the total estimated impact of exemptions for all taxes in this group
are presented in the introductory section of the report.

Also presented under this heading is the year the exemption was first enacted. In some cases, major subsequent revisions
are also noted.

Primary Beneficiaries

Here the analyst attempts to identify the type of taxpayer that actually receives the benefit of the exemption. In most
instances, the number of beneficiaries is unknown but for some exemptions an estimate is
given. It should be noted that the excise tax secrecy statute prohibits the release of
confidential information which could be identified with a particular taxpayer. For this
reason, impact estimates have been omitted for certain exemptions which are believed to be
utilized by fewer than three taxpayers.

Conflict With Other Programs

The authorizing statute which mandates the exemption study requires that this item be included in the analysis. The fact
is that there are very few examples of tax exemptions which are in direct opposition to
another state program. In the broadest sense, however, all tax exemptions conflict with
the purpose of the tax, which is to generate revenue for public programs. Therefore,
exemptions, by definition, create internal conflicts within the tax base via-a-vis other
groups of taxpayers who do not receive the preferential treatment.

Tax Savings

The estimated impact of the exemptions, in terms of accrued tax liability, is presented for each year of the current
biennium (1999-01, full 24 months) and the ensuing two year period (2001-03). For property
taxes which operate on a calendar year basis, the calendar year estimates for the year
2000 and 2001 are used as a proxy for fiscal years 2000 and 2001 which comprise the
current biennium. Estimates for the impact on local government are included for those
sources which are directly levied by cities, counties or other local taxing districts. The
receipts for some taxes are shared with local government, e.g. motor fuels and liquor
taxes, but the taxes themselves (and the exemptions) are considered as state taxes. Purely
local tax sources, such as the municipal business taxes, are not included in this report.

The starting point for analysis of exemption impacts is the workpapers for previous exemption studies. In some instances,
there is no better or more current information available. For others, new data sources and
estimation methodologies are available. For example, the Department of Revenue captures
the deduction detail listed by taxpayers on their combined excise tax returns. The results
have been very useful for this study, although inaccurate reporting by taxpayers continues
to be a problem that limits the usefulness of the data. Because of different estimating
methodologies or interpretive assumptions, the estimates in this report may differ
significantly from the amounts shown in previous exemption reports.

As indicated in the introduction, the fiscal estimates represent the tax savings for the exempted group of (otherwise)
taxpayers. The figures should not be interpreted as the amount of potential revenue to the
taxing jurisdiction if the exemption were removed, unless other statutes were
commensurately modified. In particular, the property tax exemptions are constrained by
various limitations. Also for exemptions with very large impacts, the overall limitation
on state spending (Initiative 601) might come into play. Finally, there are the obvious
legal or administrative difficulties for some exemptions which would limit their potential
ability to produce the full amount of revenue. While it is not possible to accurately
estimate the "actual" revenue in all instances, the brief discussion at the
conclusion of each exemption section tries to indicate how "realistic" the
estimates are in terms of potential additional revenue.

Assumed Tax Rates

Property tax

levy rates
for the state levy ($3.60 per thousand of assessed value, adjusted to full market value)
and aggregate local levies for all other taxing districts are projected as follows for the
following calendar years:

state tax rate of 6.5 percent; average aggregate local rate of 1.7 percent includes
taxes levied by cities, counties and transit districts was used for most local sales/use tax exemptions.

Fuel taxes

23 cents per gallon.

Alcoholic beverage taxes

20.5 percent liquor sales tax and $2.44 tax per liter.

Parimutuel tax

rate depends upon the daily gross receipts of parimutuel betting machines at horse races:
0.52 percent for annual receipts of less than $50 million or 1.3 percent for annual receipts above $50
million; plus additional tax of 1.0 percent for certain race events and additional tax of
0.6 percent for those with average on-site parimutuel receipts of more than $886,000.